HISTORY Holland's Indonesian empire of spices

by Jeffry Babb

News Weekly, July 18, 2015

The puzzle of why Holland and other Europeans coveted spices from the East Indies often perplexed me. The common explanation, that the spices were used to cover the smell of rotten meat during winter, did not satisfy me because the meat was unlikely to be all that rotten, and if it was, the Dutch would not eat it. Also, they were unlikely to spend phenomenal amounts of money simply to mask an unwholesome taste.

The VOC shipyards as they are

today in Jakarta

While I was in Taiwan, I had very good relations with the Netherlands representative office, so I decided to ask the ambassador, whom I knew well, if it was in fact true that the spice trade was based on disguising the odour of rotten meat.

“Not true,” he said with typical Dutch directness.

Holland was one of the great trading powers of Europe. The Dutch had invented many of the institutions of modern commerce such as the foreign exchange market and the stock exchange. They also invented the first multinational company and the first joint-stock company: the Vereenigde Oostindische Compagnie, or VOC, as it was better known – the United Dutch East India Company. The really radical thing about the Dutch was that they weren’t ruled by aristocrats. The people who became immensely wealthy were the bourgeoisie.

Spice was used in medicines and magical potions. Spice was certainly used in cooking. But spice was mainly used as a status symbol by the wealthy. Enormous competition existed for the very wealthy to obtain the latest and most exotic spices. These spices were phenomenally expensive.

The VOC ship Batavia was wrecked

on the West Australian coast.

Nutmeg and mace, two spices from the same tree, found in the Banda Islands in the Moluccas, were treasured. So, spices weren’t intended to mask the taste of rotten meat, but to impress one’s friends.

The Dutch were, and remain, very commercially minded people. They decided long ago that that they couldn’t feed themselves from the produce of their tiny homeland, especially one consistently menaced by the North Sea. They had to trade to survive.

The whole of Europe wanted the spices from Halmahera in the Moluccas – mace, nutmeg and cloves, among other treasures. These were the fabled Spice Islands. From Java and Sumatra came the piquant cubeb pepper. They had to get the spices from the Spice Islands to the consumers in Europe.

What would happen if the Dutch had nothing to trade? The end of World War II saw almost universal starvation stalk the Netherlands; they had nothing to sell. Today, a good proportion of “Dutch cheese” is made with Danish milk. The milk goes in Danish and comes out from the dairy as Dutch dairy products. Without trade, the Dutch would be impoverished.

VOC first joint-stock company

The Dutch were great navigators. Dutch merchants had been trading with the Spice Islands but the commercial aspects were disorganised. Dutchmen were competing against each other, as well as the Portuguese, English, French and others. To resolve this, the Dutch authorities oversaw the floating of the VOC as the world’s first joint-stock company, as a company governed by shares. The VOC was floated in 1602 and granted a 21-year monopoly over trade with the East Indies.

The VOC was much more successful than similar such enterprises. The English South Sea Company was a joint-stock enterprise. Floated in 1711, it was intended to have a monopoly on trade with Spanish colonies in the West Indies. It sought to gain a monopoly on British government debt but went bankrupt, causing widespread ruination. The memory of the South Sea Bubble fiasco hogtied British finance and capital raising for centuries.

The VOC was far more successful than the South Sea Company. The VOC paid an annual dividend of 18 per cent for almost 200 years. It acted like a government – it could raise armies, imprison people, even execute them. Founder Jan van Riebeeck was at first a law unto himself. The VOC set up its headquarters in Jayakarta, which was renamed Batavia, a soubriquet it retained for four centuries, until the Indonesian nationalists renamed it Jakarta (initially Djakarta) after independence was declared in 1945.

The VOC had a fleet of thousands of ships, including merchant vessels and warships, and an army of thousands of soldiers. Dutch navigators would take the trade winds across the Indian Ocean and then turn north.

Batavia mutiny

Navigation was not an exact science and from time to time ships miscalculated and lost their bearings, some coming to grief on the West Australian coast. One such wreck, that of the Batavia, the VOC’s flagship, led to a gruesome mutiny and a regime of murder and torture. When a rescue mission returned from Batavia, the mutineers were at first maimed and then hanged. Some of the cargo, including a sandstone archway intended for erection in Batavia, can be seen in the Maritime Museum in Fremantle.

A similar wreck, the Gilt Dragon, was found off Ledge Point on the West Australian coast. The plundering of coins from the Gilt Dragon did considerable damage to the site, which has great archaeological value.

The voyage from Holland to the East Indies was certainly hazardous. As for Eendrachtsland, or New Holland, as it became known, the VOC did not consider it had sufficient trade goods to make it worthwhile settling. The VOC was a trading enterprise that aimed to maximise profit and minimise risk. Settling a land of “sin, sun, sand and sore eyes” was not a commercial priority.

The VOC did not set out to colonise what we know today as Indonesia. For most of its history, the VOC maintained its headquarters in Batavia and controlled the Spice Islands. Java, which hosted the VOC’s capital, had by far the largest population of any of the islands of the East Indies. It was also the most fertile. Apart from pepper, Java produced rice, sugar and other valuable crops. The establishment of the jati (teak) forests was intended to promote the use of land that would not have otherwise been of productive value.

The East Indies were only one part of a complex trading system that the VOC conducted in the Southeast and East Asian region. One problem, also encountered by the British, was that the Asians had no need for the goods that the VOC had to trade, such as manufactures. This meant that the Dutch and British had to pay in gold and silver. This was draining precious metals out of Europe. The British solved this conundrum by selling the Chinese opium, to which they quickly became addicted.

The VOC also traded with Japan and others. When Japan retreated from the world, the Dutch were the only Europeans permitted to trade with Japan for 200 years. The VOC traders were restricted to a small island off the port city of Nagasaki. Eventually, the shogun banned the use of gold and silver for commerce with the VOC.

The VOC was dealing in a complex geopolitical environment. The VOC also tangled with the British in India. Bencoolen (now Bengkulu), on the island of Sumatra, remained a British possession until 1824, when the British traded it to the Dutch for Malacca on the Malay Peninsula. Similarly, Portugal was largely ejected from its Asian territories, with the exception of Goa and Macao. However, it retained considerable influence in the eastern Indies, including retaining possession of East Timor. Portugal’s cultural and religious influence was still important.

Competition for VOC

The VOC was not without other competitors. English and French traders were seeking out local compradors (dealers or buyers). The Chinese, who were to assert themselves as the main conduit between the Dutch and the local population, took considerable commercial risks. But a collapse in the price of sugar bankrupted many Chinese traders. Then the Danish East India Company began making inroads into the VOC’s traditional business.

War is an expensive business. At various times, in addition to its internecine conflict with fellow Europeans, the VOC fought the Vietnamese, Cambodians and assorted Indian states, not always triumphantly. The Chinese rebel warlord Koxinga ejected the VOC from Taiwan. The Dutch stronghold, Fort Zeelandia, can still be seen on the outskirts of Tainan, in the south of Taiwan.

The four Anglo-Dutch wars also complicated policy formulation, with relations swinging from cooperation to hostility. The fourth Anglo-Dutch War was a commercial wreck for the VOC, from which it never recovered, despite the best efforts of the Dutch states.

The VOC was running out of steam. Widespread corruption was crippling the company. The VOC was not what today we would call a “good employer”. Private trading, which allowed for some private enterprise in other similar European companies, was forbidden. The company was also draining its operating arms of capital in the East Indies to maintain the dividend, something bound to cause damage to any commercial enterprise.

After two centuries of enormous profits, the VOC was wound up, ceasing to exist on December 31, 1799. Yet Europe’s love affair with spices was not over, and many more traders were in the market. Ruinously expensive wars had been bleeding the VOC dry. From now on, it would be the Dutch government ruling the East Indies.

What had the VOC achieved? It opened up the East, for one thing, and established the foundation for Indonesia, for another. Indonesia’s economy hasn’t altered much since the VOC disbanded; Java still lives on rice, and sugar is still exported, as are spices. The jati forests still flourish. The capital is still in northwestern Java, except it is now called Jakarta. And who knows what would have happened to the Great Southern Land if the VOC hadn’t discovered it?